What Can Merchants Do: Do I Have To Pay A Credit Card Surcharge?

Brendan Harkness

Brendan Harkness | Blog

Jun 18, 2014 | Updated Apr 27, 2016

In January of 2013, the courts ruled that merchants can place an extra fee on credit card purchases, known as a surcharge, which the customer will have to pay. These regulations have become a tangled mess, as different states and different merchants deal with them in different ways, all amid a flurry of anti-trust accusations.

Merchants now have the option of charging surcharges of various amounts, depending on the type. There are brand-level surcharges, by which the merchant charges the same percentage on all MasterCard cards, for example, and another on all Visa’s. There are also product surcharges, which are imposed on a particular product bought with the card.

Limits on Surcharges

Debit cards and prepaid cards can’t be subject to a surcharge.

For credit cards, surcharges can never exceed 4% of the transaction, but the actual limit for a particular merchant may be lower than this, due to their personal terms of acceptance with the credit card company.

A merchant must notify either Visa or MasterCard at least 30 days before he or she implements a surcharge. The fact that a surcharge is applied must be disclosed to customers as they enter the store, at the point of sale, and on the receipt.

Some retailers, such as Target, are crying out against the surcharge laws, saying that they will not impose more charges on their customers. J. Craig Shearman, a spokesman for the National Retail Federation, said that surcharges will most likely be found at non-retail organizations, like airlines and doctor’s office.

Check out the regulations that merchants need to follow for surcharging for Visa here and for MasterCard here.

Surcharge Legality by State

Surcharges are legal by federal law, but some states still have laws against them. These laws override the federal law, meaning that it’s currently illegal for merchants to surcharge in the following 10 states:

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas
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